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Friday, December 15, 2006

In one of his recent posts at the CNN Business blog "Generation Risk," Pat Regnier discusses America's economic safety net and the views of the Cato Institute's Brink Lindsey. Regnier writes:

[Lindsey proposes to] cut back Social Security .... Lindsey argues that Social Security and Medicare — the two biggest social insurance programs we've got — don't really count as insurance. Since everybody knows they are probably going to get old and need medical care, he says, it's not really a risk that needs insuring. You just have to be responsible and prepare for it.

But, by using this dubious standard, many types of insurance "don't really count as insurance."

Auto insurance is something that nearly all people will need because they are highly likely to get in at least a few accidents during the multiple decades in which they are driving a motor vehicle.

Insurance is more than simply covering yourself for things you don't think you'll ever need. The main point is to space those costs out over many months or years (through monthly or semi-annual premiums) and to ensure that the shock of a single event — a hurricane or flood, a head-on car crash, physical disability, etc. — doesn't wipe out all or most of your life savings.

Thankfully, even Regnier seems to see through Lindsey's soft analysis:

... Just because I'm pretty sure I'll get both old (I hope) and sick (I'm resigned), that doesn't mean I know exactly how old or how sick I'll get.

Don't I still want some insurance against the extremes? I can save enough on my own to live to, say, 90, and I might be able to set aside enough money to pay for doctor's visits and prescriptions in old age. But what if I make it to 100 and have a few very expensive strokes along the way?

Can't government help me get insurance — not a hand-out — to protect against the cost of that?